New orders placed with US manufacturers rose in December, the second increase in the last three months, a sign that factories are emerging from a one-and-a-half year slump.
The 1.2 percent increase in orders to US$322.2 billion in December followed a revised 4.3 percent decrease in November, the Commerce Department said. Excluding transportation equipment, orders rose 0.8 percent for the month after a 0.9 percent decrease.
The largest-ever quarterly inventory reduction may open the door for factories to turn out more goods. Harley-Davidson Inc, the largest US motorcycle manufacturer, and computer-maker Hewlett-Packard Co are among companies forecasting improved sales and profits.
"We are near the bottom if not at the bottom" for manufacturing, said Steven Ricchiutto, chief economist at ABN Amro Inc in New York, before the report. Inventories are "down to levels that you can't cut anymore, so you are going to have a natural bounce" in production.
Still, for all of last year, orders placed with the nation's factories fell 8.5 percent, the worst performance since the government started keeping comparable records in 1992. In 2000, orders rose 7.1 percent.
Analysts had expected factory orders to rise 1.2 percent in December to US$325.6 billion after November's originally-reported decrease of 3.3 percent, based on the median of 43 forecasts in a Bloomberg News survey.
The factory index of the Institute for Supply Management, one of the most closely watched barometers for manufacturing, improved to 49.9 last month, the highest since an industry contraction started in August 2000, the organization reported Friday. Production and orders showed growth for the second month in a row, the first time that's happened since mid-2000.
Today's report showed December's increase in orders was led by a 1.7 percent gain in bookings for durable goods, which account for about half of all factory orders.
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